A 7.4% yield but down 25%! Is it time for me to buy this ASX REIT to earn passive income?

This business now offers a distribution yield well over 7%.

There are not too many ASX dividend shares that are offering a dividend yield of more than 7% right now. There are a few ASX REITs, though, also called real estate investment trusts, that look like fantastic opportunities for passive income.

REITs can be resilient and stable for investors because of how they make their money. Long-term rental contracts with high-quality tenants that are reliably paying rent month after month. What's not to like about that?

Well, it turns out the market is more negative on some REITs than it was several months ago. I think this makes it an excellent time to invest.

For example, the Charter Hall Long WALE REIT (ASX: CLW) unit price has fallen by around 25% since mid-September 2025 (at the time of writing). After such a large fall, there are multiple reasons why this looks like a smart period of time to buy.

Magnifying glass in front of an open newspaper with paper houses.

Image source: Getty Images

The distribution yield has soared

When a share price falls, the dividend yield goes up. That's why bear markets can be a particularly good time to consider ASX dividend shares.

As I've mentioned, the Charter Hall Long WALE REIT has dropped approximately 25% over the last several months, boosting the distribution yield by a quarter.

The business has provided guidance multiple times during the 2026 financial year that it will increase its FY26 payout by 2% to 25.5 cents per unit.

At the time of writing, that translates into a forward distribution yield of 7.4%. I'm not sure if the FY27 payout will be larger than the FY26 payout, but the ASX REIT's payout track record suggests to me that the distribution in the next financial year will be another good one.

The asset discount makes the unit price look cheap

One of the best reasons to like the ASX REIT is how cheaply it seems to be trading.

If someone wants to buy a $1 million residential property, they'll need to pay $1 million (or slightly more to be the winner).

However, it's quite common to see ASX REITs trade underneath their stated value.

Every six months, Charter Hall Long WALE REIT tells investors about its net tangible assets (NTA) – that's the overall underlying value of the business, which includes the property values, loans, cash, and so on.

The ASX REIT reported a NTA per security of $4.68 at 31 December 2025 – it's trading at a 26% discount at the time of writing. That looks too good to ignore.

Rental growth continues

Higher inflation and elevated interest rates are not ideal. For an ASX REIT, they are a headwind for interest costs and property values. But I'm not expecting elevated inflation and interest rates to last forever, particularly if they continue rising in 2026.

More importantly, the ASX REIT's rental income continues to grow, which can offset some of the headwinds.

In the HY26 period, it reported 3% like-for-like net property income growth. Around half of its portfolio has contracted rental income growth that's linked to inflation, which could see an acceleration of growth in the next year (or longer?).

In addition to that, the business has a weighted average lease expiry (WALE) of around nine years, which means its rental income is locked in for the long term.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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